There are many situations in business, politics, and life in which risk to varying degrees, risk is present. Peter Drucker said: “People who don’t take risks generally make about two big mistakes a year. People who do take risks generally make about two big mistakes a year.” In other words, risk avoidance isn’t going to help you much. The risks in war are much greater, so let’s hear what some famous generals said about risk:

General William T. Sherman, leading Union general during the U.S. Civil war, and General-in-Chief of the Army later: “Every attempt to make war easy and safe will result in humiliation and disaster.”

Field Marshal Count Hemuth von Moltke, German Army, World War I: “First reckon, then risk.”

General George S. Patton, Jr. “Taking calculated risks is quite different from being rash. “

No worthwhile activity is without risk. Life itself is not without risk. Without some risk, we cannot be successful. It is also true that sometimes the payoff is in direct proportion to the risk we must accept.

The solution is not to try and make things risk-free. In almost all cases, that just can’t be done at an acceptable cost. In some cases we get more trouble from trying to reduce risk to zero than simply accepting the risk and moving on. For example, it is possible to reduce the risk of an aircraft crashing during a landing in bad weather by advanced types of precision radar both ground and on board the aircraft. However, the costs of these systems and the increased weight to the aircraft are such that they would at least double or triple the cost of commercial flying for the minimum number of accidents they would prevent. So it wasn’t done until technology reduce cost and weight.

If you read about the $10 light bulb and $600 toilet seat that the department of defense was buying some years ago, and you were wondering why the government couldn’t simply go to the local store let me tell you why and how these things happen. Let me explain how.

How could anyone be so stupid? A regular light bulb or toilet seat fails somewhere at a critical time and for whatever reason someone gets hurt or maybe even an aircraft is damaged. Someone, it could be a commander or it could be a congressman, demands that we’ll have no more of that. No good explaining that this was a million to one chance unlikely to be repeated. Whoever has the power wants to insure his or her constituents and the media that he or she has fixed things so it will never happen again. Now to insure this light bulb won’t fail under whatever conditions, it needs to be a special light bulb. Nobody makes them like that because nobody uses them . . . there is no need. Also to test to insure that this “armored” light bulb meets the new criteria adds more to the bill. When everything is done, you end up with “a gold-plated” light bulb, but yes, you have reduced the risk of failure to close to zero. All is well and good until someone realizes the cost some years later and then we go back to the original 79 cent item again.

We can reduce or eliminate some risks, however, and we should. But, beyond a certain point we simply have to calculate the risks we take in any action. If they seem reasonable to us, we should accept them and press on without trying to cut the risks to zero..

Successful decisions in a competitive market tend to be bold decisions. In warfare, Air Force general Curtis LeMay made two very bold decisions in his career. Arriving in Europe as commander of a B-24 group, bombing results were poor because it was believed that if an aircraft flew straight and level for more than a few seconds it would get shot down. LeMay calculated that more aircraft were getting shot down because targets could not be destroyed in a single mission and crews had to return repeatedly to do the job. He ordered all his aircraft to fly straight and level on the bomb run until the bombs were released. He led the first missions with these tactics himself. Bombing accuracy increased as did loss rate per mission. However, loss rate per target destroyed decreased.

Later, Le May was promoted to a major B-29 command in the Pacific flying against the Japanese mainland. The B-29 was an expensive airplane for its day, so much so that Army Air Force Commanding General “Hap” Arnold wanted each treated like a Navy capital ship, with a formal investigation when any aircraft was lost due to enemy action. In addition to being expensive, the B-29 was an amazing airplane designed to fly higher than 20,000 and unreachable by enemy fighters or anti-aircraft guns. The problems was that they weren’t hitting their targets. This time it was the cloud cover from that altitude hiding the targets and the jet stream blowing bombs off course after they were released from high altitude. It was Europe all over again. Once again LeMay went forward boldly at great risk. He ordered armor and guns and everything else which weighed anything significant taken off the airplane. The crews were ordered to attack, not above 20,000 feet where they would escape danger from the enemy, but at 7000 feet where they were totally vulnerable. Again, LeMay led the way himself. And again his calculated risk was justified and resulted in increasing accuracy with catastrophic losses.

Jack Welch when he did the same at GE, shutting down profitable businesses in order to find the resources to exploit businesses of even greater potential.

All this does not mean that wariness does not have its place, too. And calculating and accepting the risk is much different from simply jumping in to any action without thinking at all. That type of rash behavior leads to disaster and failure more often than it leads to success.

Regarding risk, the heroic leadership lesson is:
All life involves risk, and you cannot become successful without risk
Calculate all risks before you take action – reduce or eliminate risks if you can, but if you can’t and the risks are reasonable, press on!
Successful decisions tend to be bold, but this doesn’t eliminate the requirement to be always wary.
Finally, disregarding risk without consideration leads to disaster and failure.

THIS MONTH’S THOUGHT FOR LEADERS

“Often the difference between a successful man and a failure is not one’s better abilities or ideas, but the courage that one has to bet on his ideas, to take a calculated risk, and to act.”

– Maxwell Maltz

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